I downloaded a template for an NDA from the Internet, and then just modified it for my purposes. I am contracting a design/programming company to do a project that I have, and they say that have a problem with one of the points in the contract:
Here is the point they have an issue with:
“Term and Termination. The obligations of this Agreement shall be continuing until the end of
the contract between the recipient and the discloser plus 99 years.”
I have had other designers and programmers sign this with no issue, but this company brings up the point that what if the client (meaning my client) goes to them via some other company or just goes directly to them. In both cases, they would be prevented from doing business with them. They also have an issue with the amount of time that is noted.
Isn’t that the whole point of the NDA? I don’t want my clients to ever know who I contracted out the work to, or the fact that I did contract out the work. I also don’t want them disclosing any information about our company to anyone. They say that they would never do that…that it’s company policy not to. But that means nothing to a court. In business, you need things in writing.
Also, the likelihood of my clients finding them to do business with them is very remote. So I’m not sure why they would jeopardize getting a job based on a situation that has about a .1% chance of happening.
What is your opinion on this point? Is it valid or is it asking too much? What is industry standard? I don’t think I even changed the amount of time from the template that I downloaded, so I assumed it was normal. They said that all of the NDA’s that they have signed have been for one year, and they just renew it.
99 years is a long time to enforce anything, I’d wonder if it’s even reasonable to put it in there (not a lawyer but it’s a question I’ll have to ask one).
However that’s less of an issue as it sounds like you’re mixing up an NDA with a Non-Compete agreement. An NDA generally covers learning things and disclosing them… that could be how you work, how much you pay, or who your clients are, but not necessarily who they work with in the future.
As a business you are certainly right to not want your subcontractors to go direct but you also have to respect their long term business. The idea of being limited for 99 years is simply not reasonable – what if I take a project and 5 years from now the client finds me through a different channel? There’s really no logical reason why I couldn’t take it.
I’d suggest you think about the flip side of your agreements and how you may be limiting yourself from getting the best people to work with you if you push too much.
You may also want to have an attorney review your agreements to be sure they are indeed enforceable, and that you are using the right ones for the right protection.
OK. Thanks for the info. So is their suggestion of one year with the option to renew reasonable? If not, how many years would you suggest? Regarding the point in the NDA that mentions not contacting my clients, here it is verbatim:
“Not contacting discloser’s clients. Recipient agrees not to contact any clients of Discloser in any form for any reason whatsoever.”
So if I just put one year, according to the contract, they would be able to contact my clients after a year. I just don’t feel that is reasonable time period, however I don’t know what the industry standard is. They are claiming the industry standard is one year with the option to renew. Is this true? What do you have in your contracts?
They did say that their company policy is to not contact the clients of their clients, but again, that does not hold much water in court.